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A plaintiff cannot sue LegalZoom.com Inc. for alleged violations of a state statute prohibiting the unauthorized practice of law unless and until the Ohio Supreme Court has declared that the company engaged in unauthorized practice, the U.S. District Court for the Northern District of Ohio ruled July 19 (Lowry v. LegalZoom.com Inc., N.D. Ohio, No. 4:11CV02259, 7/19/12).

Judge Benita Y. Pearson dismissed a putative class action complaint filed by a former LegalZoom customer who alleged that the legal document company violated Ohio Rev. Code §4705.07, which creates a private cause of action for any person damaged by a party that has engaged in the unauthorized practice of law.

That statute, Pearson pointed out, plainly states that such an action may be brought only after there has been “a finding by the [Ohio] supreme court that the [defendant] has committed an act that is prohibited by the supreme court as being the unauthorized practice of law.”

No such finding has been made against LegalZoom, and therefore the lawsuit must be dismissed for lack of jurisdiction, the court said.

“The statute is clear,” Pearson wrote. “No court has subject matter jurisdiction over a claim brought pursuant to [Section 4705.07(C)(2)] … unless the Supreme Court of Ohio has first made a finding that the very person in question has engaged in the unauthorized practice of law.”

The Ohio Supreme Court made clear in Greenspan v. Third Fed. Sav. & Loan Ass'n, 912 N.E.2d 567, 25 Law. Man. Prof. Conduct 442 (Ohio 2009), that because there is no common law cause of action for unauthorized practice in that jurisdiction, compliance with the UPL statute is mandatory if a plaintiff is to pursue a lawsuit claiming that a defendant has engaged in unauthorized practice, Pearson noted.

LegalWoes for LegalZoom

Although LegalZoom succeeded in getting the Lowry complaint thrown out, the company still faces several other suits and administrative proceedings claiming that the company engages in the unauthorized practice of law. See 28 Law. Man. Prof. Conduct 312.

While many of those actions remain pending, LegalZoom has settled at least one other. The latest development was the April 30 approval of a settlement in a Missouri federal class action that LegalZoom failed to have dismissed. See Janson v. LegalZoom.com Inc., W.D. Mo., No. 2:10-cv-04018-NKL, 4/30/12, and 27 Law. Man. Prof. Conduct 508.

LegalZoom agreed to pay up to $6 million in settlement fees to resolve the Janson matter, including $1.8 million in legal fees to the plaintiffs' attorneys.

• requiring a Missouri-licensed lawyer to review templates for any legal document products sold in the state;

• removing from LegalZoom advertising any “references to 'we will take care of the rest' in the phrase 'simply answer a few questions and we will take care of the rest' … and references that compare, directly or by implication, the costs of LegalZoom's self-help products with services provided by an attorney without, in close proximity to such comparison, clearly and conspicuously disclosing that LegalZoom is not a law firm and is not a substitute for an attorney or law firm”; and

• agreeing to offer Missouri customers an “individual half-hour consultation” with a Missouri attorney through a “free five-day enrollment” in a “Legal Advantage Plus Program.”

Advisory Opinion Insufficient.

The attorneys for plaintiff Christopher Lowry declined to comment to BNA on the court's ruling.

However, in his complaint, Lowry asserted that a 2008 advisory opinion of the Ohio Supreme Court's Board on the Unauthorized Practice of Law was sufficient to demonstrate that the court had, in fact, made a finding that LegalZoom engaged in UPL.

[A]n online service that prepares a legal document or instrument for a customer by selecting an appropriate legal form, makes choices for inclusion of certain provisions in the form, and generally aids in the preparation of the document or instrument is not a scrivener service and is prohibited in Ohio.

Lowry alleged that the UPL board's opinion was “solicited by and endorsed by the Ohio Supreme Court,” and thus constituted “a clear statement as to what the Supreme Court of Ohio deems to be the unauthorized practice of law in Ohio.”

Pearson rejected that argument for two reasons. First, she noted that the opinion contains a disclaimer stating, “Advisory opinions of the Board on the Unauthorized Practice of Law are informal and nonbinding.”

Second, Pearson continued, the advisory opinion addressed legal document vendors overall rather than any of them specifically. Thus, the court said, it could not constitute a finding by the Ohio Supreme Court “that a particular person has engaged in the unauthorized practice of law,” which Section 4705.07(C)(2) makes a condition precedent to a lawsuit against that individual or entity.

Bar Is Lower Elsewhere.

In 2010, the Florida Supreme Court set forth a slightly more relaxed standard under which plaintiffs may assert a cause of action for unauthorized practice in that state.

Like Ohio, Florida requires a supreme court determination on the unauthorized practice of law as a prerequisite to such an action. However, in Goldberg v. Merrill Lynch Credit Corp., 35 So. 2d 905, 26 Law. Man. Prof. Conduct 315 (Fla. 2010), the court made clear that such predeterminations in Florida can be based on informal advisory opinions from a UPL committee or on previous bar actions against others who have engaged in similar practices.

“[I]f the actions complained of have been ruled on by this Court, then a plaintiff may be able to state a cause of action with proper pleading, even though the defendant accused of the unauthorized practice of law has not been subject to a Florida Bar proceeding,” the Florida Supreme Court declared.

The court added, however, that a Florida defendant who asserts that a previous UPL determination does not apply to his particular conduct is “free to seek a stay of action … while obtaining an advisory opinion from The Florida Bar.”

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